Groupon announced Wednesday that it has created a mobile payments system, dubbed Groupon Payments. Like Square and PayPal, Groupon Payments uses a little plastic dongle that merchants plug into their iPhone or iPad to start swiping credit cards.

The payments system is built right into the Groupon Merchants app, means a merchant can swipe a card and do a transaction while also redeeming deals and updating their analytics to note how many deals have been redeemed, what the average bill looks like, and how much has been spent altogether.

But Groupon isn’t just trying to nibble a piece of the mobile payments pie that Square and PayPal have effectively created. It’s positioning itself as a serious competitor, charging nearly half of what Square and PayPal currently charge. Transactions using Visa, MasterCard, or Discover will be charged 1.8%, plus 15 cents when swiped (2.3% plus 15 cents when keyed). And the rates apply to all merchants, regardless of whether they’ve run a Groupon deal before.

Square charges 2.75% or a flat rate of $275 a month for businesses processing less than $200,000 a year. PayPal charges 2.7%.

Groupon Payments also allows merchants to get paid overnight, rather than waiting the usual two or three days for payments to be deposited into an account.

But the ability to have an all-in-one mobile payments and advertising solution will definitely make Groupon a viable competitor in this space. With Groupon Payments, merchants can process transactions while simultaneously redeeming deals and getting a live transaction history, daily sales reports, revenue trends, and more.

“We’re confident Groupon Payments will make for a better experience between customers and employees, make merchants lives easier with the aggressively competitive rates and extensive features we’re offering, and the operating system for local commerce is becoming an exciting reality,” wrote Groupon’s VP of Mobile and Merchant Products Mihir Shah, in a blog post.

Back in July, Groupon shared its plans to create an “operating system” for local commerce. The details were somewhat nebulous at the time, but the idea is to connect and streamline all operations in a Main Street store, from advertising and the point-of-sale, to loyalty services that draw customers back. At present, much of a mom-and-pop store’s business is disjointed and requires a lot of man hours to manually add up sales and tax. CEO Andrew Mason’s aim is to release a suite of software and technology services that would essentially link all of the disconnected systems together.

“Right now, we’re just this advertising solution,” Mason explained to Bloomberg Businessweek. “If we can come up with an ecosystem that local merchants use to run their business and it’s connected to consumers, then I think that’s a pretty sizable business.”

It sounds like Groupon is doing just that with Groupon Payments.

Of course, what would make Groupon Payments even better is if deals could be linked with cards so that Groupon subscribers and merchants could do away with printouts and barcodes altogether. And the only thing that would make that even better is if Groupon built an NFC feature into Groupon Payments so that transactions could be conducted without even needing a credit card. But alas, no NFC chip for the iPhone 5. Looks like we all have to wait for the iPhone 6.

Either way, it’s all music to shareholders’ ears. Groupon shares popped more than 7% Wednesday and were trading at $5 as of 11 am PT. That’s welcome news after a pretty bad summer. Groupon shares plummeted more than 50% between June and September.